Parag Milk Foods charts Rs 80 cr expansion in AP

Mumbai-based Parag Milk Foods Private Limited will be investing Rs 80 crore in two tranches to expand the capacity of its processing and value-added products’ manufacturing plant at Palamaner in Chittoor district of Andhra Pradesh by March 2013.

The company’s plant in Chittoor, which was set up at an investment of Rs 110 crore, currently has a capacity to process 800,000 litre of milk. It would go up to 1.3 million litres after the capacity expansion, Devendra Shah, chairman of Parag Milk Foods, said here on Monday.

He said the company would increase the daily procurement of milk in the state to one million litre from the present 600,000 litre as the expansion progresses.

The company, which has recently raised Rs 150 crore from IDFC Private Equity Fund, is considering going public for an investment requirement of around Rs 450 crore once the capital markets turn conducive to issue public offers.

“We will finalise our investment plans ahead of the public issue, which we intend to do in the next one-and-a-half years,” Shah said.

The company is planning to expand its procurement and manufacturing footprint beyond Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu by setting up one plant each in the north and the eastern parts of India for which it seeks to raise money from public.

It had so far raised private equity in two rounds, with the first being Rs 55 crore from Motilal Oswal. The percentage of equity stake to be given to Oswal and IDFC is yet to be determined as the matter is linked to the performance of the company, according to Parag management.

The company currently handles procurement of two million litre of milk per day, 85 per cent of which goes into making value-added products through its brands ‘Govardhan’ and ‘Go’ unlike its counterparts in AP who mainly deal with liquid milk business, according to Shah. The company expects to achieve Rs 1,200-crore turnover this year, as compared to Rs 870 crore in the last financial year.